In the last few years, there has been a lot of talk about PPI mis-selling, which is where customers were sold PPI as part of UK credit card or loan packages without them being aware of it. However, there are situations and circumstances in which payment protection insurance (PPI) can be really useful, so you shouldn’t let all the fuss about PPI mis-selling put you off this financial product if you actually need it.
What is PPI?
A lot of people may have heard of PPI in the last few years without having any idea what it is. Quite simply, it is a type of insurance which covers your repayments on loans, credit cards and other forms of lending if you can’t make them for certain reasons. These reasons include serious illness or injury, as well as some other reasons (depending on the PPI provider) why you aren’t able to work and earn money to pay your debts.
If you do your research into PPI and make sure you know exactly what type of cover you are getting when you take out a loan or credit card, there is no danger that you will be a victim of PPI mis-selling. Companies are also not allowed to bundle PPI in with financial products anymore, at least not without telling you first.
When can PPI be useful?
There are many things to think about before taking out payment protection insurance. For example:
- If you have no other cover. You should find out if you have any other cover for loan and credit card repayments in the event that you can’t work. Life insurance, critical illness insurance and income protection insurance can all cover loan repayments, as can sickness or redundancy benefits offered by your employer. If you don’t have any cover, PPI could be the right choice for you the next time you apply for a credit card.
- If you only have insurance for illness. Even if you have illness insurance, this is not likely to cover employment as well. This is when PPI really comes into its own, as it covers many different types of unemployment. However, you should check whether a particular policy covers dismissal or self-employment before taking it out.
- You don’t have any savings to fall back on. Those without savings can really benefit from PPI, as it will act as a safety net in case the worst happens. Even if you have small sum in savings, this won’t be enough to cover you in the long-term, and you could be left without a penny for emergencies.